SMT. NARINDER KAUR , PHAGWARA V. ACIT- PHAGWARA CIRCLE, PHAGWARA

ITA 260/ASR/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7079 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-01-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 11-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAVANI SHANKAR
• Assessee Lawyers: Y K SUD
• Section: 143(1)

Judgement Text

PAGE | 1 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH AT JALANDHAR BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.260/ASR./2017 (ASSESSMENT YEARS: 2012-13) SMT. NARINDER KAUR D/O S.SOHAN SINGH, V & PO BAGEDOWAL BANGA ROAD, PHAGWARA VS. ACIT PHAGWARA CIRCLE PHAGWARA PAN AAWPK8842N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI Y.K.SUD, A.R. RESPONDENT BY: SHRI BHAVANI SHANKAR, D.R DATE OF HEARING: 07.01.2019 DATE OF PRONOUNCEMENT: 15 .01.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-2, JALANDHAR, DATED 22.02.2017, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) OF THE INCOME TAX ACT, 1961, (FOR SHORT I.T. ACT), DATED 26.02.2015 FOR A.Y. 2012-13. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.1,70,000/- MADE BY THE AO ON ACCOUNT OF UNDERSTATEMENT OF QUANTUM AND VALUE OF SCRAP. 2. THAT CIT(A) WHILE SUSTAINING THE ADDITION FAILED TO APPRECIATE THAT THE ADDITION WAS MADE BY THE AO COMPLETELY ON CONJECTURES AND SUMMARISES WITHOUT PLACING ANY MATERIAL OR EVIDENCE ON RECORD AGAINST THE ASSESSEE. 3. THAT THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND WITHOUT POINTING OUT ANY DEFECT IN THE SAME AND WITHOUT REJECTION OF THE BOOKS OF ACCOUNTS, THE TRADING ADDITION OF PAGE | 2 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT RS.1,70,000/- COULD NOT HAVE BEEN MADE BY THE AO. 2. BRIEFLY STATED, THE ASSESSEE WHO AS A PROPRIETOR OF A CONCERN VIZ. M/S M.J. ENGINEER IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PARTS OF AGRICULTURAL IMPLEMENTS VIZ. POWER TAKE OFF (PTO) SHAFTS FOR TRACTORS HAD E-FILED HER RETURN OF INCOME FOR A.Y. 2012-13 ON 24.09.2012, DECLARING NET TAXABLE INCOME OF RS.21,62,190/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE I.T. ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE IN THE COURSE OF HER AFORESAID BUSINESS OF MANUFACTURING AND TRADING OF PARTS OF AGRICULTURAL IMPLEMENTS WOULD PURCHASE THREE COMPONENTS OF THE END PRODUCT VIZ. SHEAR YOKE, ROUTER AND SPRING/SIMPLE YOKE FROM THE OUTSIDE PARTIES. APART THEREFROM, TWO COMPONENTS VIZ. BROACHED BUSH AND SPLINED SHAFT WERE MANUFACTURED BY HER INHOUSE. IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE AFTER ASSEMBLING ALL OF THE AFORESAID PARTS WOULD SUPPLY THE END PRODUCT TO MAJOR PLAYERS OF THE INDUSTRY VIZ. SONALIKA, SWARAJ, MAHINDRA, TAFE ETC. FURTHER, IT WAS NOTICED BY HIM THAT ALTHOUGH THE ASSESSEE CONCERN WAS DULY REGISTERED UNDER THE EXCISE ACT ON 28.09.2011, YET FOR ALL PRACTICAL PURPOSES THE EXCISE BECAME APPLICABLE IN HER CASE ONLY FROM THE SUCCEEDING YEAR I.E F.Y 2012-13. 4. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE SOLD 13,595 KG OF IRON SCRAP THAT WAS GENERATED IN THE COURSE OF INHOUSE MANUFACTURING OF TWO COMPONENTS VIZ. (I) BROACHED BUSH; AND (II) SPLINED SHAFT. HOWEVER, IT WAS NOTICED BY HIM THAT THE ASSESSEE HAD NOT SHOWN ANY OPENING OR CLOSING STOCK OF SCRAP. THE A.O WAS NOT SATISFIED WITH THE AFORESAID STATE OF AFFAIRS AS WAS DISCERNIBLE FROM THE FINANCIAL STATEMENTS OF THE ASSESSEE AND HELD A CONVICTION THAT IT WAS BEYOND COMPREHENSION THAT A FACTORY WORKING ON A CONTINUOUS PRODUCTION SYSTEM WOULD NOT HAVE ANY OPENING OR CLOSING STOCK OF SCRAP. IN ORDER TO VERIFY THE FACTUAL POSITION HE CALLED UPON THE ASSESSEE TO PROVIDE PAGE | 3 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT QUANTUM OF TOTAL INCOMING WEIGHT [(ON ACCOUNT OF RAW MATERIAL (+) FINISHED GOODS PURCHASED FROM OUTSIDE)] ALONG WITH QUANTUM OF OUTGOING WEIGHT [(FINISHED GOODS SOLD (+) SCRAP SOLD)]. ADMITTEDLY, IT IS A MATTER OF RECORD THAT THE ASSESSEE WAS PURCHASING RAW MATERIALS (OTHER THAN ROUNDS) IN PIECES AND NOWHERE IN THE PURCHASE BILLS THE WEIGHT OF THE RAW MATERIAL/READY GOODS WAS MENTIONED. SIMILARLY, THE SALES OF THE END PRODUCT WAS ALSO MADE BY THE ASSESSEE TO ITS CUSTOMERS VIZ. SONALIKA, SWARAJ, MAHINDRA, TAFE ETC. IN NUMBERS AND NOT BY WEIGHT. HOWEVER, AS IS DISCERNIBLE FROM A PERUSAL OF THE ASSESSMENT ORDER, THE A.O CALLED UPON THE ASSESSEE TO PLACE ON RECORD THE QUANTUM OF TOTAL INCOMING WEIGHT (ON ACCOUNT OF RAW MATERIAL + FINISHED GOODS PURCHASED FROM OUTSIDE) ALONGWITH THE QUANTUM OF OUTGOING WEIGHT (FINISHED GOODS SOLD + SCRAP SOLD). AT THE INSTANCE OF THE A.O, THE ASSESSEE ON AN ESTIMATE BASIS FACTORED/MODIFIED THE DETAILS AVAILABLE WITH HER IN RESPECT OF THE OPENING STOCK, INCOMING RAW MATERIALS/READY GOODS PURCHASED, ITEMS MANUFACTURED, CLOSING STOCK AND THE ITEMS SOLD DURING THE YEAR UNDER CONSIDERATION BY INCORPORATING THE WEIGHT AND PLACED ON RECORD THE DETAILS AS UNDER: TOTAL WEIGHT OF OPENING STOCK OF RAW MATERIAL 6,873.65 A1 TOTAL WEIGHT OF INPUT MATERIAL (IN KG.) 5,75,896.20 A2 TOTAL WEIGHT OF SOLD MATERIAL - SHAFTS (IN KG._ 4,18,592.55 TOTAL WEIGHT OF OPENING STOCK OF SHAFTS (459 UNITS) 11,655.00 (409 *+50* 28.60) TOTAL WEIGHT OF SHAFT PRODUCED IN F.Y. 2011-12 4,06,937.55 B1 TOTAL WEIGHT OF OUTPUT MATERIAL OTHER MATERIAL (IN KG.) 198.00 B2 TOTAL WEIGHT OF CLOSING STOCK (IN KG.) 1,55,658.53 B3 SCRAP GENERATED BY M.J. ENGINEERS (IN HOUSE MACHINING) 6,380.78 [(A1+A2) MINUS (B1+B2+B3+B4) NOTE: (I) ALL THE ABOVE MENTIONED WEIGHTS ARE IN KGS. PAGE | 4 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT NOTE:(II) THE RELEVANT WORKING SHEETS (8 PAGES) OF INCOMING RAW MATERIAL/ READY GOODS PURCHASED, ITEMS MANUFACTURED, OPENING STOCK, CLOSING STOCK AND ITEMS WISE GOODS SOLD DURING FINANCIAL YEAR 2011-2012, PREPARED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY REQUISITIONING THE ORIGINAL BILLS/DOCUMENTS/RECORDS IN THIS OFFICE ARE PLACED ON RECORDS. ON THE BASIS OF THE AFORESAID DETAILS FURNISHED BY THE ASSESSEE, THE A.O CALLED UPON HER TO EXPLAIN THE DIFFERENCE IN WEIGHT OF 6380.78 KG. [I.E. QUANTUM OF TOTAL INCOMING WEIGHT (-) QUANTUM OF OUTGOING WEIGHT] (AFTER GIVING DUE CONSIDERATION TO WEIGHT OF OPENING STOCK ITEMS AND WEIGHT OF CLOSING STOCK ITEM). IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT THE AFORESAID DIFFERENCE IN WEIGHT OF 6380.78 KG. WAS ATTRIBUTABLE TO INVISIBLE LOSS I.E UNUSABLE SCRAP GENERATED DURING THE COURSE OF THE MANUFACTURING PROCESS WHICH COULD NOT BE COUNTED/WEIGHED AND HENCE WAS NOT SALEABLE. IT WAS THE CLAIM OF THE ASSESSEE THAT IN THE COURSE OF ITS MANUFACTURING PROCESS THERE WOULD BE GENERATION OF BOTH VISIBLE LOSS (IRON SCRAP) AND INVISIBLE LOSS (WHERE NO USABLE SCRAP WAS OBTAINED). IT WAS SUBMITTED BY THE ASSESSEE THAT THE VISIBLE LOSS IN THE SHAPE OF 13595 KG. OF IRON SCRAP GENERATED IN THE COURSE OF THE MANUFACTURING PROCESS DURING THE YEAR WAS SOLD BY HER FOR A CONSIDERATION OF RS.3,55,394/-(I.E.@ 26.14 KG.), AND THE SAME WAS DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION. IT WAS THE CLAIM OF THE ASSESSEE THAT THERE WAS NEITHER ANY OPENING STOCK NOR CLOSING STOCK OF SCRAP DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2012-13. APART THEREFROM, IT WAS SUBMITTED BY THE ASSESSEE THAT THE INVISIBLE LOSS WHICH RESULTED IN GENERATION OF UNSALEABLE SCRAP COULD NEITHER BE COUNTED NOR WEIGHED. THE ASSESSEE IN ORDER TO FORTIFY THE VERACITY OF HER AFORESAID CLAIM BROUGHT TO THE NOTICE OF THE A.O THAT THE INVISIBLE LOSS GENERATED DURING THE YEAR UNDER CONSIDERATION WEIGHED 6380.78 KG. ONLY, WHICH WORKED OUT TO 1% OF THE TOTAL CONSUMPTION OF 582769.85 KG OF RAW MATERIAL/READY GOODS PURCHASED DURING THE YEAR. HOWEVER, THE A.O DID NOT FIND FAVOUR WITH THE AFORESAID CONTENTIONS OF THE ASSESSEE AND DECLINED TO ACCEPT THE SAME. BEING OF THE VIEW THAT THE ASSESSEE HAS SUPPRESSED THE SALE OF 6380.78 KG OF SCRAP, THE A.O WORKED OUT THE VALUE OF THE SAME @ 26.14 PER KG. AND MADE AN ADDITION OF RS.1,66,794/-IN THE HANDS OF THE ASSESSEE. PAGE | 5 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTIONS ADVANCED BY THE ASSESSEE TO IMPRESS UPON HIM THAT THERE WAS NO SUPPRESSION OF SALE OF SCRAP, WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME AND UPHELD THE ADDITION MADE BY THE A.O. 6. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. IN THE COURSE OF THE HEARING OF THE APPEAL, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE THAT DESPITE THE FACT THAT THERE WAS NO MATERIAL BEFORE THE A.O WHICH WOULD PROVE THAT THE ASSESSEE HAD CARRIED OUT THE SALE OF SCRAP OUTSIDE HER BOOKS OF ACCOUNT, THE LATTER HAD MERELY ON THE BASIS OF WHIMSICAL ASSUMPTIONS AND CONJECTURES MADE AN ADDITION OF RS.1,70,000/- ON ACCOUNT OF UNDISCLOSED SALE OF SCRAP IN THE HANDS OF THE ASSESSEE. THE LD. A.R. IN ORDER TO BUTTRESS HIS AFORESAID CONTENTION TOOK US THROUGH THE FACTS OF THE CASE AND THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. A.R THAT THE RAW MATERIALS/READY GOODS WERE PURCHASED BY THE ASSESSEE IN NUMBERS AND NOT ON THE BASIS OF WEIGHT. IN ORDER TO FORTIFY HIS AFORESAID CLAIM, THE LD. A.R TOOK US THROUGH CERTAIN PURCHASE BILLS FORMING PART OF THE ASSESSES PAPER BOOK (FOR SHORT APB). FURTHER, IT WAS SUBMITTED BY HIM THAT THE SALES OF THE FINISHED GOODS WERE ALSO CARRIED OUT IN NUMBERS AND NOT ON THE BASIS OF WEIGHT. AGAIN, IN ORDER TO SUBSTANTIATE HIS AFORESAID CLAIM THE LD. A.R DREW OUR ATTENTION TO CERTAIN SAMPLE SALE BILLS FOR THE YEAR UNDER CONSIDERATION WHICH SUPPORTED HIS AFORESAID CLAIM. IT WAS SUBMITTED BY THE LD. A.R THAT DESPITE THE FACT THAT THE PURCHASES/SALES WERE CARRIED OUT BY THE ASSESSEE IN NUMBERS/QUANTITY BASIS AND NOT ON THE BASIS OF WEIGHT, HOWEVER, THE A.O HAD FOR THE PURPOSE OF ARRIVING AT SELF-SUITING INFERENCES CALLED UPON THE ASSESSEE TO FURNISH THE CALCULATION OF THE MATERIAL LOSS BY FACTORING/MODIFYING THE PURCHASE OF INCOMING RAW MATERIALS/READY GOODS PURCHASES, ITEMS MANUFACTURED, OPENING STOCK, CLOSING STOCK AND GOODS SOLD FOR THE YEAR UNDER CONSIDERATION BY INCORPORATING THEIR RESPECTIVE WEIGHTS. IT WAS SUBMITTED BY THE LD. A.R THAT ONLY AT THE INSTANCE OF THE A.O TO FURNISH THE AFORESAID DETAILS ON WEIGHT BASIS THAT THE ASSESSEE BEING LEFT WITH NO PAGE | 6 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT OTHER ALTERNATIVE HAD THUS ON AN ESTIMATE BASIS PLACED ON RECORD THE SAID DETAILS. THE LD. A.R SUBMITTED THAT AS PER THE AFORESAID CHART COMPILED ON AN ESTIMATE BASIS THE INVISIBLE LOSS OF UNSALEABLE SCRAP WHICH COULD NEITHER BE WEIGHED OR COUNTED WORKED OUT AT 6380.78 KG. THE LD. A.R. IN ORDER TO DRIVE HOME HIS CONTENTION THAT THERE WAS NO SUPPRESSION OF THE SCRAP SALE DURING THE YEAR UNDER CONSIDERATION SUBMITTED THAT THE SAME COULD SAFELY BE GATHERED FROM A PERUSAL OF THE GROSS PROFIT RATE OF 12.38% OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, WHICH WAS IN CONFORMITY WITH THAT OF THE IMMEDIATE PRECEDING YEAR AND PROGRESSIVE AS IN COMPARISON TO THE EARLIER YEARS. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE A.O DESPITE NOT POINTING OUT ANY INFIRMITY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, MUCH THE LESS REJECTING THE SAME, HAD HOWEVER DISLODGED THE TRADING RESULTS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED BY THE LD. A.R THAT THE ADDITION MADE BY THE A.O MERELY ON THE BASIS OF SELF SUITING WHIMSICAL ASSUMPTIONS, PRESUMPTIONS, SURMISES AND CONJECTURES COULD NOT BE SUSTAINED AND IS LIABLE TO BE VACATED. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. THE LD. D.R DREW OUR ATTENTION TO PARA 4.1.5 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE A.O HAD IN THE ABSENCE OF A PLAUSIBLE EXPLANATION OF THE ASSESSEE IN RESPECT OF THE DEFICIT WEIGHT OF 6380.78 KG. RIGHTLY MADE AN ADDITION TOWARDS SUPPRESSED SALE OF SCRAP IN THE HANDS OF THE ASSESSEE. 8. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, IT IS A MATTER OF FACT BORNE FROM THE RECORDS THAT THE ASSESSEE IN THE COURSE OF ITS BUSINESS PURCHASED RAW MATERIAL (OTHER THAN ROUNDS) AND READY GOODS IN PIECES, AND NOWHERE IN THE PURCHASE BILLS THE WEIGHT OF THE RAW MATERIAL/READY GOODS WAS MENTIONED. INSOFAR, THE SALES MADE BY THE ASSESSEE TO ITS CUSTOMERS VIZ. SONALIKA, SWARAJ, MAHINDRA, TAFE ETC. IS CONCERNED, A PERUSAL OF THE SALE BILLS TO WHICH OUR ATTENTION WAS DRAWN BY THE LD. A.R. REVEALS A SIMILAR STORY AND IN THE SAME TOO THERE IS PAGE | 7 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT ONLY A MENTION OF THE NUMBERS/QUANTITY OF THE UNITS SOLD WITH NO MENTION OF THEIR WEIGHT. IN SUM AND SUBSTANCE, THE ASSESSEE HAD CARRIED OUT BOTH THE PURCHASES OF THE RAW MATERIALS/READY GOODS AND SALES OF THE END PRODUCT IN NUMBERS AND NOT BY WEIGHT. WE FIND THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION GENERATED 13595 KG OF IRON SCRAP IN THE COURSE OF ITS INHOUSE MACHINING WHICH WAS SOLD BY HER FOR A CONSIDERATION OF RS. 3,55,394/- (I.E @ 26.141/- PER KG. ). THE AFORESAID SALE OF SCRAP WAS DULY ACCOUNTED FOR BY THE ASSESSEE IN HER AUDITED BOOKS OF ACCOUNT. AS OBSERVED BY US HEREINABOVE, IT IS ALSO A FACT THAT THE ASSESSEE HAD NOT REFLECTED EITHER OPENING STOCK OR CLOSING STOCK OF SCRAP DURING THE YEAR UNDER CONSIDERATION. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND FIND THAT THE DETAILS OF MATERIAL LOSS (INVISIBLE LOSS) WAS FURNISHED BY THE ASSESSEE (ON WEIGHT BASIS) ONLY AT THE INSTANCE OF THE A.O. RATHER, THE A.O DESPITE BEING WELL CONVERSANT WITH THE FACT THAT THE ASSESSEE WAS MAKING THE PURCHASES OF THE RAW MATERIAL/READY GOODS AND SALES OF THE END PRODUCTS IN NUMBERS/QUANTITY BASIS AND NOT AS PER WEIGHT, HAD HOWEVER DIRECTED THE ASSESSEE TO FACTOR/MODIFY THE INCOMING RAW MATERIAL/READY GOODS PURCHASED, ITEMS MANUFACTURED, OPENING STOCK, CLOSING STOCK AND SALES CARRIED OUT DURING THE YEAR ON WEIGHT BASIS. ADMITTEDLY, IN THE BACKDROP OF THE AFORESAID FACTS, THE DETAILS FURNISHED BY THE ASSESSEE AT THE INSTANCE OF THE A.O IN RESPECT OF THE MATERIAL LOSS WAS ON AN ESTIMATE BASIS, AND THUS THE SAME IN NO WAY CONCLUSIVELY SUBSTANTIATED THE SHORTAGE/DEFICIT OF THE BALANCE WEIGHT OF 6380.78 KG. BE THAT AS IT MAY, THE ASSESSEE DULY EXPLAINING THE AFORESAID DEFICIT/SHORTAGE OF 6380.78 KG. HAD SUBMITTED BEFORE THE A.O THAT THE SAME WAS ATTRIBUTABLE TO THE GENERATION OF INVISIBLE LOSS IN THE COURSE OF THE INHOUSE MANUFACTURING PROCESS CARRIED OUT BY HER UNIT. HOWEVER, THE A.O NOT FINDING FAVOUR WITH THE AFORESAID EXPLANATION OF THE ASSESSEE HAD REJECTED THE SAME. 9. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION AND FIND SUBSTANTIAL FORCE IN THE CONTENTIONS ADVANCED BY THE LD. A.R TO BUTTRESS HIS CLAIM THAT THERE WAS NO UNACCOUNTED SALE OF SCRAP BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. RATHER, IN OUR CONSIDERED VIEW AS THE PAGE | 8 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT VERY WORKING OF THE DEFICIT/SHORTAGE OF 6380.78 KG AS IS DISCERNIBLE FROM THE DETAILS FURNISHED BY THE ASSESSEE IN ITSELF IS BACKED BY A PROCESS OF ESTIMATION, WHICH THE ASSESSEE WAS COMPELLED TO ADOPT IN ORDER TO EFFECT COMPLIANCE TO THE AFORESAID DIRECTIONS OF THE A.O. WE ARE OF A STRONG CONVICTION THAT AS THE VERY BASIS FOR ARRIVING AT THE SHORTAGE/DEFICIT WEIGHT OF 6380.78 KG. IN ITSELF IS NOT BACKED BY ANY CONCRETE MATERIAL, THUS THE SAME DOES NOT INSPIRE MUCH CONFIDENCE AS REGARDS THE VERACITY OF THE WORKING THEREIN CARRIED OUT BY THE ASSESSEE. APART THEREFROM, WE FIND THAT THE ASSESSEE HAD TENDERED A PLAUSIBLE EXPLANATION WITH THE A.O AND HAD DULY EXPLAINED THAT THE SHORTAGE/DEFICIT WEIGHT OF 6380.78 KG. WAS ON ACCOUNT OF INVISIBLE LOSS I.E. GENERATION OF UNUSABLE SCRAP IN THE COURSE OF THE INHOUSE MACHINING CARRIED OUT BY THE ASSESSEE. HOWEVER, AS OBSERVED BY US HEREINABOVE, THE EXPLANATION ADVANCED BY THE ASSESSEE WAS REJECTED BY THE A.O WITHOUT ASSIGNING ANY COGENT REASON FOR SO DOING. WE ARE NOT ONLY UNABLE TO PERSUADE OURSELVES TO ACCEPT THE VERY BASIS OF WORKING OF THE MATERIAL LOSS (ON WEIGHT BASIS) AS HAD BEEN CARRIED OUT BY THE ASSESSEE AT THE INSTANCE OF THE A.O, BUT ARE ALSO UNABLE TO COMPREHEND THAT NOW WHEN THE A.O NEITHER HAD ANY CONCRETE BASIS FOR DRAWING OF ANY ADVERSE INFERENCES AS REGARDS THE GENERATION OF EXCESS IRON SCRAP BY THE ASSESSEE, NOR ANY MATERIAL WHICH WOULD EVIDENCE THAT THE ASSESSEE HAD CARRIED OUT ANY SALE OF SCRAP OUTSIDE THE BOOKS OF ACCOUNT, THEN HOW THE ADDITION OF RS.1,70,000/- TOWARDS SUPPRESSED SALE OF SCRAP COULD HAD BEEN MADE BY HIM. RATHER, IN OUR CONSIDERED VIEW THE VERACITY OF THE TRADING RESULTS OF THE ASSESSEE CAN SAFELY BE GATHERED FROM THE FACT THAT ITS G.P. RATE OF 12.38% WAS WELL IN CONFORMITY/PROGRESSIVE TO THAT OF THE PRECEDING YEARS. LASTLY, THE FACT THAT THOUGH THE A.O HAD NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, BUT HAD DRAWN ADVERSE INFERENCES IN RESPECT OF THE DULY ACCOUNTED SCRAP SALES REFLECTED BY THE ASSESSEE IN HER BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION, ALSO DOES NOT FIND FAVOUR WITH US. IN SUM AND SUBSTANCE, WE ARE OF THE CONSIDERED VIEW THAT IN TOTALITY OF THE AFORESAID FACTS THE ADDITION OF RS.1,70,000/- MADE BY THE A.O TOWARDS SUPPRESSED SALE OF SCRAP IS MERELY BACKED BY SELF SUITING ASSUMPTIONS, PRESUMPTIONS, PAGE | 9 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT SURMISES AND CONJECTURES ON THE PART OF THE A.O, AND NOT ON THE BASIS OF ANY CONCRETE OR CLINCHING MATERIAL AVAILABLE WITH HIM. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS THE ADDITION OF RS.1,70,000/- MADE BY THE A.O CANNOT BE SUSTAINED AND IS LIABLE TO BE VACATED. RESULTANTLY, NOT BEING ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW TAKEN BY THE CIT(A) WHO HAD UPHELD THE ORDER OF THE A.O, WE SET ASIDE HIS ORDER AND DELETE THE ADDITION OF RS.1,70,000/- MADE BY THE A.O. 10. THE APPEAL FILED BY THE ASSESSEE MERITS ACCEPTANCE AND IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.01.2019 SD/- SD/- ( N.K. SAINI) (RAVISH SOOD) VICE PRESIDENT JUDICIAL MEMBER PLACE: JALANDHAR; DATE: 15 .01.2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , / DR, ITAT, CAMP BENCH, JALANDHAR. 6. [ / GUARD FILE. //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) /ITAT, CAMP BENCH, JALANDHAR. PAGE | 10 ITA NO.260/ASR/2017 A.Y. 2012-13 SMT. NARINDER KAUR VS.ACIT SR.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS 15.1.19 SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON 15.1.19 SR.PS/PS 7 FILE SENT TO THE BENCH CLERK 16.1.19 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DISPATCH OF ORDER